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HomeMy WebLinkAbout11 - Conference Center Feasibility StudySEW PART 94cpu SUBJECT: CITY OF NE\ .0111,T BEACH PLANNING/ BUILDING DEPARTMENT S3oo NEWPORT BOULEVARD NEWPORT BEACH, CA 92658 (714) 644-3zoo; FAX (714) 644-3250 Hearing Datc.. Agenda Item No.: Staff Person: REPORT TO THE MAYOR AND CITY COUNCIL Conference Center Feasibility Study May 28, 1996 11 nC_ Patrick J. Alford (714) 644-3235 19110 MAY ? ,�), SUMMARY: A proposal to study the feasibility of developing a conference center in Newport Beach. RECOMMENDED ACTION: • Receive and accept the recommendation of the Tourism and Revenue Enhancement Sub -Committee of the Economic Development Committee to retain the services of PKF Consulting to conduct the conference center feasibility study; • Establish the City's share of the contract cost at 50%, not to exceed $12,000, with the remainder paid by the Conference and Visitors Bureau; • Authorize staff to enter into an agreement between the City, the Newport Beach Conference and Visitors Bureau and PKF Consulting to conduct the feasibility study. DISCUSSION: Background Since October 1995, the Tourism and Revenue Enhancement Sub -Committee of the Economic Development Committee (EDC) has been investigating the feasibility of developing a conference center in Newport Beach. The Need for a Study Visitor -serving businesses are a vital part of the City's economy. Each year the City's hotels book hundreds of meetings that have brought millions of dollars into the local economy. However, the City's ability to book meetings, conferences, trade shows, and corporate retreats and workshops is limited by the number of meeting rooms and the amount of exhibit space. At present, the largest hotel meeting room has a capacity of 700 persons and the largest single exhibit space has 8,000 square feet. Contrast this with facilities in nearby communities that can Conference Center Feasibility Study May 28, 1996 Page 1 provide meeting rooms with the capacity for thousands of people and exhibit space in the tens of thousands, if not hundreds of thousands, of square feet. The City is simply not in the running for a significant share of business because it cannot offer the facilities required for larger meetings and conferences. A conference facility presents a great opportunity to make the City more competitive. It would allow the City to book more meetings and conferences, increase hotel occupancy and bring more customers to restaurants and shops. This translates to more visitor dollars spent in the community and more revenues for the City. The Proposal A study is needed to determine if there is an opportunity for the City to become more competitive in making larger bookings by expanding its conference facilities. After reviewing several proposals (Price/Waterhouse, Coopers & Lybrand, and E&Y Kenneth Leventhal), the Tourism and Revenue Enhancement Sub -Committee of the EDC is recommending that PKF Consulting of Los Angles, California be selected to conduct such a study. The PKF Consulting proposal is for a study that would address the following: • The need for a conference/community center in Newport Beach • The potential economic impacts of the center. • The recommended size and configuration of the center, should a need exist. • The scope of the center. • The center's interrelationship with the community. • Location/site considerations. Cost and Fundin The cost of the study is estimated to be $23,000. This estimate does not include incidental expenses, such as travel expenses and photocopying, which will be capped at $1,000. It is proposed that the cost of the study be borne equally by the City of Newport Beach and the Newport Beach Conference and Visitors Bureau. The City's share of the contract cost will be funded from the Economic Development Capital Improvement allocations in the proposed 1996- 97 budget. The consultant will require a $10,000 retainer, which the Newport Beach Conference and Visitors Bureau has agreed to pay as part of their share of the cost. Conference Center Feasibility Study May 28, 1996 Page 2 Respectfully submitted, Patrick J. Alford l� Senior Planner Attachment: PKF Consulting proposal FAWP51\PLANNING\ICC-RP nCC960528\3CNF-CTR.DOC Conference Center Feasibility Study May 28, 1996 Page 3 SENT BY : PKF CONSULTING - L. a. : 5-16-96 r-� May 16, 1996 16:05 :PKF CONSULTING - L.a- 7146443250:fm 2/ 9 Ms. Rosalind Williams Newport Beach Conference & Visitors Bureau 3300 West Coast Highway Newport Beach, California 92660 and Mr. Kevin Murphy City Manager City of Newport Beach 3300 Newport Boulevard Newport Beach, California 92663 Dear Ms. Williams and Mr. Murphy: 1pq�v! 11__ CONSULTING 611 Wilshire BpulavQrd Suite 800 Loa Angeles CA goo17 Telephone (213) 680-u9ou Telefax (213) 629-8240 In accordance with your request, we are pleased to submit this proposal for professionw services to be tendered by PKF Consulting to the Newport Beach Conference and Visitors Bureau. We understand that you are contemplating the development of a conference/community center and you would like us to provide consulting assistance in the preliminary development of a program for the project, specifically addressing the following,: • the need for a conference/comtnunity center in Newport Beach • the recommended size and configuration of the center, Should a need exist • the scope of the center • the center's inter -relationship with the community PKF CONSULTING PKF Consulting is an international Crrrt of management consultants, industry specialists, and appraisers who provide a full range of services to the hospitality, real estate, and tourism industries. Readquartered in San Ff Ancisco, the iron has offices in New York, Pihiladeluhia, Boston; A.danta, Miami- Houston, Los Angeles, Wasllington.. _DC, drid Hong Kung, with nearly 100 professionals arid support staff serving both public and private sector clients. PKF Curtsulti)ig is a member of the Pannell Kerr Forster International Association, with 250 offices in 75 countries. Member, Pannell Kerr Forster International A SENT BY:PKF CONSULTING - L.A. : 5-16-96 16:05 :PKF CONSULTING - L.A— 7146443250:# 3/ 9 9 Ms. Williams and Alr. Murphy 2 May 16, 1996 The firm is staffed and equipped to provide the leisure and real estate industries with the following key services: Asset Advisory Services, Transaction Advice and nue Diligence, Feasibility Studies, Appraisal and Valuation, International Hospitality Consulting, Public Sector Leisure and Tourism Consulting, and Litigation Support. Senior professionals of the firm have been a part of the hospitality business for upwards of 25 years. They head teams of consultants who bring a broad range of experience - corporate finance, hotel operations, hotel development planning, international tourism - to meeting client needs. Real estate professionals carry MAT (Member of the Appraisal Institute) and CRE (Counselor of Real Estate) designations. In addition to our long standing expertise in tine hotel industry, we would bring to you in this engagement substantial experience in preparing feasibility analyses and facility programs for mixed use developments that include a lodging component. In the past, we have conducted a number of feasibility studies of hospitality -related properties located in various regions of the world. Further PKF Consulting is the publisher of the publication which acts as a standard for the industry regarding hotel and lodging industry statistical data. Our qualifications for conference aril convention centers are attached to this proposal. SCOPE AND METHODOLOGY This assignment would constitute a prelinninary analysis designed to encompass the following major puirits. • Identify the market suitability of possible development sites for a conference/ community center in Newport Beach, • Analyze the economic conditions and development trends in Newport Beach, and the current base of demand for group functions held at Orange County coastal hotels and conference facilities; • Complete a census of existing and proposed hotels in Newport Beach and surrounding markets including an analysis of the mix and seasonality of demand, market occupancies and average room rates, the status of proposed hotel projects, and the outlook for the local hotel market; • Survey and interview potential users of the center to develop a profile of facilities needed; • Review the regional competitive market in Southern California to determine the scope of the market in which Newport Beach would compete; Develop recommendations of facilities which would best serve the needs of the potential market; IJ SENT BY:PKF CONSULTING - L.A. : 5-16-96 : 16:06 :PKF CONSULTING - L.A- 7146443250(4m 4/ 9 Ms. li'illianrs and Mr. llurpliy 3 -May 16, 1996 • Prepare preliminary estimates of utilization for the facilities as recommended, including overall use, a profile of the types of groups expected to patronize tite tacility, and projected seasonality; + Recommend the optimal development strategy and operating structure for the property; and • Discuss the economic impact a conference center has on a community PHASE ONE - NIARKET DEMAND ANALYSIS Site Analysis PKF Consulting identify possible development sites for a conference center in Newport Beach. As the location of a conference center is of major importance to the success of a project, we will analyze and evaluate the following tactors regarding the subject's location and possible advantages/disadvantages in comparison with competing centers. Our review will include an analysis of the location of Newport Beaclr relative to potential sources of demand, as well as a review of the attributes of alternative locations, such as: • Accessibility of the transportation network and demand generators; • Visibility from various access points, • Ambiance of the area as it rnight impact demand; and • Relationship to current lodging supply_ Area Review We %,•ill father and analyze relevant statistical data regarding the local market area to determine whether the economic cn%ironment appears suitable for the project. We will examine possible correlations between key economic factors and the demand for meeting facilities and will use available forecasts of these indicators in our evaluation of potential future demand_ Our work will include interviews with representatives from city and county planning and development as well as divisions considered likely to provide pertinent data. Market Analysis Using our experience and data base on the Southern California market, we will identify the conference/ cornn►urnty centers which we believe would compete with Newport Beach_ Important criteria used in selecting such facilities will include size, location, distance from demand generators and market orientation. Upon identifying these competitive facilities, we will develop a profile of each facility including• • Size of primary space, + Support facilities offered, V SENT BY : PKF CONSULTING - L. a. ; 5-16-96 ; 16:06 ; PKF CONSULTING - L. A- 7146443230;# 5/ 9 Als. 971liams and tUr. Murphy 4 May 16, 1.996 • Year built, year expanded, • Number of events held annually; • Average and maximum group size; • Lodging demand generated; • Principal sources of demand; • Rental rates; • Management structure, • Expansion plans, if any; and • Status of proposed facilities. Potential User Surveys We vrill identify a variety of potential users of the proposed conference/cornrnunity center and survey them to deterniinc their potential interest in holding meetings and/or civic functions in Newport Beach. Such potential users will include meeting planners of associations, either state, regional, or local; management of major local coiporaiiuns, representatives of corporations in the Newport Beach area, local, civic and arts leaders; and organizers of trade shows and exhibits. Information that we can expect to receive frorn such user groups and which will aid us in our analysis will include. • Type of meeting, convention or function held; • Typical group size; • Frequency and duration of events held; • Distance they are willing to travel from the principal demand source: • Where events have been held previously, • Facilities and amenities required; • Use of lodging as part of the event; • Average cost per person for the event; • Price sensitivity, and • Likelihood of their using a conference center in Newport Beach. Supply and Demand Estimates On the basis of the foregoing analysis, we will have the information to prepare an estimate of the overall potential demand for the proposed conference center in Newport Beach, including both the existing demand and the potential demand that currently cannot be accommodated by the existing facilities because of size limitations. We will identify local demand and the demand for space in the wider Southern California region. We will also identify any potential changes in the supply of conference facilities in the competitive market area. We will then evaluate each of the Principal segments of demand (such as corporate meetings, associations, trade shows, etc.) and describe their characteristics in this particular market and their historical performance. Then we SENT BY:PKF CONSULTING - L.A. 5-16-96 ; 16:06 :PKF CONSULTING - L.a— 7146413250;# 61 9 Ms. Williams mrd kr. Murphy S I1ay 16, 1996 will estimate growth rates in demand for each of these market segments and project the anticipated future demand. By presenting the projections of demand growth in conjunction with the estimates of anticipated changes in the competitive market supply, we will be able to determine the potential for absorption of the subject facility This supply and demand analysis will be the primary basis for preparing our recommendations of the appropriate sizing of the subject facility. Facilities Recommendations We will prepare recommendations for facilities which, in our opiriiun, will best meet demonstrated market demand, including- • Concept and quality level of the facility; • Total space capacity; including exhibit space, largest function room, and breakout or conference rooms; • Parking requirements; • Technical systems such as projection system, teleconferencing capacity, computer hook-ups, and video recording and playback; and • Other complementary facilities/services such as food and beverage, recreation, etc. In addition to the foregoing recommendations regarding the physical facilities of the center itself, we will also provide a recommendation as to any additional lodging requirements which may be needed to complement the project. Should we determine through our research that an additional lodging facility should be developed in conjunction with the conference center project, we will provide recommendations as to the size and quality level which would be most appropriate. Conference Center Utilization Our projections of conference center utilization will include an analysis of user types. For example, it may be determined thatthe center should focus primarily on the association market, with limited emphasis on corporate business, In such a case, the facilities recommended and our projections of market capture would reflect this positioning. The facilities programming and use estimates would differ markedly should it be determined that the facility could best serve the market for trade shows, exhibits and conventions, as well as community functions. Based on the user mix, we will be able to project seasonality. PRASE TWO - ECONOMIC ANALYSIS Recommend Operating Structure As part of our analysis, we will review funding mechanisms and operating structures for conference centers and will make a determination as to whether the City of Newport Beach SENT BY : PKF CONSULTING - L.A. : 3-16-96 : 16:07 ;PKF CONSULT I NG - L.A- 7146443230;1,4 7/ 9 M;. Willimns and Mr. Murphy ti 11fay 16, 1996 should own and operate the facility or pursue another method, such as leasing out the property, hiring outside management, or some other alternative. Economic Impact Lastly, we will address the economic impact a conference center can have on a community. Specifically, we will examine similar coastal markets to illustrate the potential economic impact derived frons a conference,/convention center, and how the direct and indirect economic benefits derived from conference centers tend to compare with the capital and operating costs involved. As part of our analysis, we will focus on delegate spending and projected tax revenues. REPORT At the conclusion of our analysis we will provide you with a sunumary draft report setting forth our findings and conclusions relative to each area of analysis. We will meet with you to discuss any areas of the report in which you would like amplification or clarification and then issue a final report to you- LIMITATIONS ou_ LI ITATIONS OF TIS STUDY Our final report will be subject to the following limitatioiw 1 We have no obligation to update our findings regarding changes in market conditions that occur subsequent to the completion of our fieldwork. 2. Our report, and the material submitted, may not be used in printed material used in connection with the sale of participation interests to the general public. 3. The scope of our study and reports thereon would not include the possible impact of zoning or environmental regulations, licensing, requirements or other such matters unless they have been brought to our attention and are disclosed in the report d. Any drafts or preliminary information communicated to you during the course of the assignment will be stamped "draft for discussion purposes only," and will be subject to revision. 5. The liability of PKF Consulting is limited to the client only and only for the dollar amount of the total fees collected from this individual engagement. Further, there is no accountability, obligation or liability to any third party, if our report(s) is presented to anyone other than the client, the client shall make such party aware of alt limiting conditions and assumptions of the assignment and related discussions. 6. In case of a lawsuit (brought by lender, partner or part oamer in any form of ownership, tenancy or other third party), Client will hold PKF Consulting completely harmless from and against any liability, cost or expense incurred in such action, regardless of its outcome and any such costs or expenses will be the responsibility of the client. A SENT 6Y:PKF CONSULTING - L.A. 5-16-96 : 16:07 :PKF CONSULTING - L.A— 71=16443250:4 8l 9 Itis. Williarns and kfl'. ltfurphy 7 May 16, 1996 FEES AND STUDY TIMETABLE Our professional fees for the assignment will be based on our current hourly billing rates which are as follows: We estimate that our professional fees for the assignment as outlined herein will be $23,000. We will not exceed the estimated amount without your prior authorization. The fees set forth are based on our attendance at three meetings with city representatives. Time incurred at any additional meetings will be billed at our normal hourly rates. In addition to our fees, we will be reimbursed for any out of pocket expenses incurred in performance of the assignment such as travel of our representatives while in the field, long distance telephone, computer costs and photocopying, to a maximum of $1,000. If, at any time during the course of the study we form an initial opinion that there is insufficient demand for the proposed Iacilities, we will suspend the assignment at that point and discuss our findings with you_ If you desire that we terminate the assignment at this point, we will write you a brief letter summarizing our findings and charge you only for that time actually incurred to date at our regular per diern rates, plus expenses. As is customary in assignments of this nature, we require a retainer of $10,000 prior to commencing the assignment. The remainder of our fees and expenses will be billed and payable on a progress basis. Based on. our discussions, we would commence the assignment on June 17, 1996, assuming authorization prior to that, with a commencement meeting on June 14, 1996 at 8:00 A.M.. We anticipate completion of our draft report within eight weeks from the start of the assignment, and we estimate that it will take us one week or less from the point of reviewing the draft report with you to finalize it. The assignment will be conducted under the active direction of the undersigned Karen Johnson and Scott Paschall, Vice Presidents of PYX Consulting and Jena Thornton, Consultant will also be working on the assignment. APPROVAL AND ACCEPTANCE if the foregoing correctly states the nature of the wink you wish undertaken at this tine, and arrangements are satisfactory, please sign the enclosed copy of this proposal and return it to us, together with the n equested retainer, as our authorization for the assignment. If.. on the other hand; von: have any questions, please do not hesitate to call on us. PER HOUR Senior Vic President $275-300 Vice President 175-225 Associate 125-155 Consultant 75-100 We estimate that our professional fees for the assignment as outlined herein will be $23,000. We will not exceed the estimated amount without your prior authorization. The fees set forth are based on our attendance at three meetings with city representatives. Time incurred at any additional meetings will be billed at our normal hourly rates. In addition to our fees, we will be reimbursed for any out of pocket expenses incurred in performance of the assignment such as travel of our representatives while in the field, long distance telephone, computer costs and photocopying, to a maximum of $1,000. If, at any time during the course of the study we form an initial opinion that there is insufficient demand for the proposed Iacilities, we will suspend the assignment at that point and discuss our findings with you_ If you desire that we terminate the assignment at this point, we will write you a brief letter summarizing our findings and charge you only for that time actually incurred to date at our regular per diern rates, plus expenses. As is customary in assignments of this nature, we require a retainer of $10,000 prior to commencing the assignment. The remainder of our fees and expenses will be billed and payable on a progress basis. Based on. our discussions, we would commence the assignment on June 17, 1996, assuming authorization prior to that, with a commencement meeting on June 14, 1996 at 8:00 A.M.. We anticipate completion of our draft report within eight weeks from the start of the assignment, and we estimate that it will take us one week or less from the point of reviewing the draft report with you to finalize it. The assignment will be conducted under the active direction of the undersigned Karen Johnson and Scott Paschall, Vice Presidents of PYX Consulting and Jena Thornton, Consultant will also be working on the assignment. APPROVAL AND ACCEPTANCE if the foregoing correctly states the nature of the wink you wish undertaken at this tine, and arrangements are satisfactory, please sign the enclosed copy of this proposal and return it to us, together with the n equested retainer, as our authorization for the assignment. If.. on the other hand; von: have any questions, please do not hesitate to call on us. SENT BY:PKF CONSULTING - L.A. : 3-16-96 : 16:08 :PKF CONSULTING - L.a is lt'iilia»u and Xlr. Murphy 8 7116443230:? 9% 9 Alay 16, 1996 We appreciate having the opportunity to Submit this proposal and look forward to working with you and your associates on this most interesting assigrutient. Sincerely, PKF ts7tltir ce B u Senior Vice President APPROVED AND ACCEPTED: Newport Beach Conference & Visitors Bureau xy: Title: Date: Ciry of Newport Beach By: Title: Date: f� NvpmLa.1Hf [OIORfUI(OAS To: The Honorable Mayor John Hedges and Members of the City Council From: Rosalind Williams President/CEO Re: Conference Center Feasibility Study My apologies for not speaking before you on this subject. I am in fact, attending an international incentive trade show, continuing the successful sales and marketing efforts on behalf of Newport Beach which began two years ago. As President/CEO of the Newport Beach Conference & Visitors Bureau, I have been actively involved with the fact finding committee chaired by Barry Lewin, General Manager of the Hyatt Ne -,,,,porter, in order to determine the increased market potential for Newport Beach tourism. As in any significant undertaking, the prudent approach is to consider all possibilities in advance of any decision making. It is my belief, that PTF offers the professionalism and experience necessary to enable Newport Beach to look at tourism alternatives for the future, to the extent that the Directors of the Newport Beach Conference & Visitors Bureau have agreed to share equally in the expense for the study for the City of Newport Beach. I encourage you to support this study, as the resultant effect could well be the basis upon which we build the economic future of our community. RW:bg Dictated but not read NEWPORT BEACH CONFERENCE & VISITORS BUREAU 3300 W. Coast Highway, Newport Beach, California 92663, (714) 722-1611 1 -800 -94 -COAST FAX: (714) 722-1612